Ban on Rs 500 and Rs 1000 notes: E-wallets go mainstream

Most physical stores have not seen an increase yet in people using digital wallets following the cash withdrawal; increases, if any, are in usage of debit and credit cards.Shalina Pillai&Anand J | TNN | November 14, 2016, 08:26 IST

Almost every digital payment solutions venture is now focusing on getting people to use their solutions for offline transactions - and not merely for purchases made online.MobiKwik to offer personal loan services soon as currency disappears, people are turning to online options, doubling downloads of payment apps. And kirana stores and investors alike now want to tie up with digital wallet startups.

When the management at payment service provider PayU discussed sales targets last month, the mood was somber. The sales executives needed to be more aggressive, felt PayU managing director Jitendra Gupta, who had just joined the firm following PayU's acquisition of his venture Citrus Pay.

The latest sales meeting, which took place last week, was very different though. "We were all smiling. I told the team, look, your sales targets have been completed by the Prime Minister himself," Gupta says.

The mood's the same at Gurgaon-based mobile wallet company MobiKwik. Founder and director Upasana Taku hasn't slept a wink in the past two days. "A lot is happening at the of fice. It's exciting, but many things need to be taken care of now. My one-year-old thinks I have forgotten him completely," she says.

SURGING NUMBERSThe government's move to withdraw Rs 500 and Rs 1,000 notes has come as a bonanza for the digital payment solutions startups, which, after a period of dramatic growth, had begun to see growth rates slow down. With no cash to pay, millions of people who felt cash was safer than digital transactions, or who simply had not thought that digital was worth their while, are now downloading payment apps and refilling their digital wallets.

Paytm, the largest Indian mobile payment wallet with more than 100 million users and 2 million transactions a day, saw app downloads going up by three times and payments for offline transactions by five time in the first two days following the government's move. It added one million new saved credit debit cards in two days, cards that are used to refill the wallet.

MobiKwik, which has around 35 million customers, said there was 100% growth in customer numbers day-on-day in the past few days. Mobile payment app Chillr, which has 2 million downloads and is promoted by HDFC, has seen a growth of 30% in app usage and a 50% increase in downloads. PayU's digital wallet business, which has over 30 million consumers, saw the amount of wallet loads rise two times in the first two days.

GOING OFFLINEAlmost every digital payment solutions venture is now focusing on getting people to use their solutions for offline transactions - and not merely for purchases made online. And that's really the big opportunity, given that online transactions are still a tiny proportion of the overall transactions in India. So, if you walk into a McDonald's or Cafe Coffee Day or Shopper's Stop today, you can use a digital wallet on your phone to pay for your purchase.

PayU can be used at some 15,000 merchant locations, and is now planning to target even local kirana stores. "Out of our 30 million customers, only about 500,000 transact offline. But this is set to change," said Gupta.

Digital wallet Freecharge has seen a 10-times surge in the number of retail merchant signups in the past few days, with most of the queries coming from grocery stores, pharmacies and food joints.

Razorpay, which provides a simple way to integrate transaction websites and apps with digital wallets and cards, says it is inundated with requests from both offline and online merchants. "Many small businesses in India have websites, but these are mainly static, used to provide information and not for transactions. Many never bothered to introduce payment gateways because it was expensive, until a few Indian startups emerged in the space," said Harshil Mathur of Razorpay, a startup that was part of the prestigious Y Combinator Accelerator.

Payment gateway Instamojo's co-founder Sampad Swain is considering revising his merchant enrollment targets. "We have 1.5 lakh merchants currently, mainly small and midsized merchants. The growth in the past two days has been amazing. I wanted to onboard 1 million merchants in the next 18 months. Looks like I'll have to change that goal," Swain said.

STOI spoke to a number of physical stores. Most said they have not seen an increase yet in people using digital wallets following the cash withdrawal; increases, if any, are in usage of debit and credit cards. But many who have not yet tied up with a wallet player are proactively looking to do so. Aparna Sharma, 24, started using Paytm when she shifted to Hyderabad early this year, for her post-graduation. Apart from using it to recharge her phone and pay her bills, she has started using it as a payment option in offline stores. And the usage has slightly increased in the past three days. "A lot of restaurants and grocery shops have Paytm as their payment option. Small kirana stores and a few tailor shops also accept it. It's easy to use," she said.

INVESTOR RUSHFor many, another way to drive this growth is through the recently launched Unified Payment Interface (UPI). UPI is a payment system that allows transactions between two bank accounts through a smartphone, without the trouble of entering credit card details, or net banking passwords. Some like Mobikwik have already integrated UPI into their platform.

Sony Joy, CEO of Chillr, which plans to integrate UPI by the end of the year, said cost of transactions will come down with UPI, increasing the readiness of merchants to go digital.

Yet, digital is likely to remain a small part of overall transactions in the foreseeable future. IT product think-tank iSpirt, which recently did a survey on digital adoption, said India's internet penetration is still too low for digital wallets to significantly replace cash.

Priyashmita Guha, a fellow at iSpirt, said Android phones had iSpirt, said Android phones had still not reached maids and drivers. "The lack of local languages or identifiable icons to make transactions happen in an easily perceivable way on smartphones are still not in place. While demonetization does give a thrust to digital payments, it will be years before we see big online payment adoption," she said.

But for the digital entrepreneurs and investors, even the 220 million or so who have smartphones is a big number, bigger than the populations of most countries. Instamojo's Swain, who has raised funds from Kalaari Capital and Blume Ventures, has received calls from over 18 investors in the past two days wanting to connect with him. "The narrative has totally changed," he said. Razorpay's Mathur said he has got calls from four latestage investors. MobiKwik's CEO Bipin Preet Singh sums it up with a laugh: "This is a very exciting time to be an entrepreneur in this space."